Baby food products are the fastest growing product category in China’s supermarket retail sector.
THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY
USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT
GAIN Report Number: CH11825
China - Peoples Republic of
Who’s feeding China’s offspring? Baby food market
Market Development Reports
Summary: Baby food products are the fastest growing product category in China’s supermarket retail
sector. As China’s economy expands, stronger purchasing power and increased living standards are
enabling greater consumer demand for high quality baby food including imports. The country’s
emerging urban middle-class consumers are willing to pay a premium for high quality imported baby
food and nutrient products and are especially leery of domestically produced baby food products even
when these have foreign brands. With a post-2008 melamine tainted milk scandal still lingering in the
minds of distrustful middle class consumers, global infant product manufacturers are pushing their way
to seize market share or find a niche in this promising market. However these products are not limited
to infant formula as local baby food producers are anticipating 90-percent growth in the industry by
2014. On August 14, 2012, China’s Ministry of Health convened a press release and provided official
response to the recently heated topic of “colostrums milk powder prohibition”.
Starting with the Goodness
Parents want the best for their children. They attach great
importance to feeding their babies (one per
household) quality ingredients containing sufficient
nutritional components. Babies roughly between 0- 3
years are considered infants when they need to be fed
with specifically made infant formula and other baby
food. Infants can only consume soft and watery- style
food. Other than breast milk, infant formula is the
major food to begin with, followed by other
supplements such as dried baby food like cereals,
ready-to-eat baby food and snacks, as well as Picture source from Reuters
nutritional beverages. Breastfeeding for babies
beyond six months is usual among Chinese women. Homemade baby food is also traditionally common
in Chinese families where infants are fed rations of rice porridge with mashed fruit and vegetables. As
the market witnesses commercial baby food flying off of retail stores shelves and with dramatic prices
difference and gaps based entirely on brand-recognition, these items are being promoted in convenience
stores and community stores in every first, second and third tier city in China. More and more Chinese
parents tend to purchase a variety of imported baby food, particularly in urban households with rising
per capita disposable incomes. Generally speaking, baby formula and instant baby paste (whey/rice
cereal) are the two most widely consumed baby food items in China.
Figures Speak Louder than Words
China is the second largest baby food and infant formula market in the world. According to National
Bureau of Statistics of China, the annual average birth rates in China (in the last four years and
forecasting until 2017) reach around 15 million~17 million. Typically, the industry refers to “baby food”
as infant food or food for children under 3 years old. If we take the average birth rate of 160 million and
multiply it by 3 (the first three years when infants consume baby food), the annual baby food targeted
per individual baby will be around 50 million. The annual average baby food per household expenditure
is around $800, which means China is a $40 billion market. Another market research by a recognized
investment consulting firm also indicates that disposable expenses spent on infants in 1st and 2nd tier
cities run around $950-$2,800 per year.
Recent statistics conducted by China Baby Products Industry Research Center show that there has been
a steady growth of 15 percent per annum in China’s baby products market over the past ten years.
Moreover, data from Euromonitor International demonstrates that out of the $41 billion global baby
food market, China accounts for 23 percent of the total.
A market research report on “China Baby Food and Infant Formula Outlook in 2016” illustrates that
China’s baby food and infant formula milk market retail sales reached $3.281 million in 2007, while in
2009, the segment grew by 21 percent. Infant formula has marked a growth in sales of 14 percent in
2011 relative to the increase of 14 percent and 16 percent in 2010 and 2009, respectively.
Fierce competition in the baby food market
Global baby food manufacturers are striving to consolidate and seize greater market share worldwide.
Many are branding their products with their own standards which are backed-up by a particular’s
country’s pediatric associations. According to market research conducted by a popular Chinese food
and beverage website (http://news.40777.cn/info_71310.html), the top ten international infant formula
manufacturers (in no particular order) that are dominating the China market include:
Mead Johnson (U.S.)
Anmum (New Zealand)
Some large producers, such as U.S. infant formula group Mead Johnson, the top player with the largest
market share in China remains confident with improved earnings in 2012 amidst a slight decline in the
sector’s (specific to infant formula) overall growth rate in 2011. Other manufacturers like Nestle, who
recently (in 2011) acquired Pfizer Inc.’s baby food unit, now aim to regain momentum in China’s baby
food market after its untimely departure from the China market back in 2005.
Post has conducted market research at four high end
supermarkets chains (Ole, Taste, Jusco and
Parknshop) in Guangzhou with individual sector on
baby food. Baby food areas in these four retail
stores are teeming with customers and promoters.
One supermarket even has at least ten in-store
promoters recommending infant formulas to
consumers and a baby playing pin area so that
parents can listen to the promoters as they are
charmed into purchasing a particular brand of baby A baby food sector in one of Guangzhou’s famous retail
food. Dominating baby food brands are either store
products imported with original package, or foreign
brands with raw material imported but packaged in China. The target buyers of these brands are mostly
middle class consumers both male and female according to in-store staff. According to feedback from
supermarket retailers, for baby milk powders, foreign brand names of milk powder manufactured in
China such as Mead Johnson, Abbot and Wyeth, are widely accepted because of a perceived reliability
by consumers in quality and their affordability in price. The retail price for a tin of milk powder
800gram falls largely between $27~$40 (RMB170~RMB250).
On the other hand, directly imported baby milk powder is becoming increasingly popular among
Chinese consumers. Most of these products come from Germany, Holland, Switzerland, Australia, New
Zealand and Japan. However, of all the retail stores Post visited, none of the directly imported baby milk
powder from the United States. Almost every single overseas manufactured milk powder will have the
wording of “imported with original package” ( ) on the commercial package to catch consumers’
attention. Retail prices for these products range from $46~$56 (RMB290~RMB350), which are
comparably higher yet demand is strong.
Although 90 percent of the infant milk powders are cow milk, some of the competitors from Holland
and New Zealand have recently began to market goat milk formula. Studies have shown that mineral
substance and protein proportion contained in goat milk is closer to human milk than bovine milk, which
is considered healthier, more nourishing and easier for babies to digest.
Traceability is a value added advantage which reassures parents when they purchase baby formula. One
Dutch company established an online traceability system that allows consumers to trace back to the
cultivated farmland, raw milk collection, as well as important links of production and transportation in
order to improve the customers’ confidence and loyalty.
With regard to other supplemented baby food, the most widely available brands are Heinz, Gerber
(under Nestle) and Biostime. These three main competitors all have production bases in China.
According to retail stores’ baby food promoters, Heinz is the considered a reliable brand by most
consumers with the widest variety of baby food in the market. Heinz also established an Institute of
Nutrient Science in China which is dedicated to improve nutritional structure. And, the company has
already shaped solid consumer loyalty in the market. There is no directly imported baby food available
in China. Only one German organic baby food brand can be found in local large supermarkets.
China’s Newly-Published “Colostrums Milk Powder Prohibition”
On August 14, 2012, China’s Ministry of Health convened a press release and provided official response
to the recently heated topic of “colostrums milk powder prohibition”. Basically no colostrums powder is
allowed in three product categories inclusive of:
1. Infant (0~12 months) formula(definition from the People’s Republic of China National
2. Older infants (6~12 months) and young children(12~36 months) formula (definition from the
People’s Republic of China National Standard(Guobiao) GB10767-2010)
3. Infant formula with special medical purpose.
Representatives from China’s Ministry of Health claim that colostrums milk powder with low
production quantity is difficult to collect and the quality is unstable making it an unsuitable ingredient
for processed baby formula. This stipulation will become effective on September 1, 2012. Beforehand,
all legally produced or imported baby formulas with colostrums milk powder within expiry date are still
allowed for sale.
Organic Baby Food
Organic food is also a fast growing sector in China. An increasing portion of affluent parents, with
higher baby health consciousness, feel the need to purchase organic baby food even though the cost may
be double in price when compared with conventional baby food products. Many reports on the internet
discuss the development of allergies which are brought about the use of chemicals possibly contained in
conventional baby food.
Organic baby formula and supplementary foods are emerging in China’s 1st tier cities. Wording such as
“Organic”, “Imported with Original Package” “Pure and Safe” usually appear on the commercial
packaging; however there is no standard or regulation on the us of these subjective marketing terms. It is
also mandatory for all foreign organic products to receive the China Organic seal approval before
entering into the retail sales channel. Thus, all of the organic baby food will have the organic product
seal printed on the packaging as well. Most of the organic baby food emphasizes the idea of food safety,
better nutrients and environmental-friendliness. Take baby formula for instance, manufacturers claim
that throughout the entire production process, pesticides or fertilizers are not utilized for forage grass
plantation, no genetically modified bovine feed ingredients were allowed, and no growth hormones were
injected in the animal to raise its milk output. Also, edible food additives are strictly forbidden to be
added to the production of all types of baby food. Although the retail price for a tin of 800 gram organic
baby formula is much higher (around $73/RMB 460), an increasing number of affluent parents are still
willing to pay a premium for the “organic” label.
According to research conducted by Innovative Research and Products (iRAP), Inc., the global market
for organic infant food will increase to $2.26 billion by 2012 compared with $760 million in 2007. In the
long term, Southeast Asia countries now the largest producers and exporters of snack food to China will
likely emerge as producers for organic baby products. However, these countries will need to import
their raw materials for third countries such as the United States, Swissland, Australia and New Zealand.
What influences Nursing Mothers’ Choice for Baby Food?
According to the United Nations’ World Health Organization and UNICEF, parents are recommended to
wait until a child is six months of age to switch from breast milk to powdered milk. Consequently
quality baby milk powder is most crucial during the initial substitution. Usually, there are three different
types of milk powders, inclusive of infant formula for 0~12 months of age, “follow-on” formula for
6~18 months of age and “growing up” formula for 1~3 years age. Many Chinese mothers believe in the
philosophy of “breast is best”. Breast milk is said to be the best food for new-born babies which consists
of all the essential nutrients and elements with the right proportions required for infants’ growth and
overall development. When mothers choose infant milk powder, they tend to select formulas that are
closest to human milk. Many of the well-received brands packages will highlight that their formulas are
proximal to breast milk with similar protein proportions to strengthen infants’ immunity, 1,3-dioleoyl-2-
palmitoyl-glycerol (OPO) to protect babies from enteric infection and allergy, as well as long chain fatty
acids including DHA and ARA to improve brain and retina development.
Chinese also believe that excessive “heat” (food that leads to bloating or excessive fluid retention) inside
the body generated by the food consumed may trigger disease. Nursing mothers are more inclined to
pick formulas without palmitic acid, which has been considered a primary reason to create “heat” (in
this case inflation) to the infant’s body, and influence babies’ nutritional absorptive and digestive
functions. Although medical experts have a negative attitude toward this argument, most commercial
brands tend to label products “containing non palmitic acid” as a marketing tool when promoting their
infant formula products.
With the exception of milk powders, a variety of baby food is swarming into the market. While choosing
ready-to-eat baby food such as whey cereals, colostrums milk powder, vegetable and fruit-based purees,
mashed noodles, teething rusks, mothers will select products without edible additives like flavoring
essence, sugar cane, maltodextrin and thickeners. It is also stipulated by Ministry of health of China in
the Notice 21 issued in 2008 that no edible flavoring essence should be added to any kind of baby food
for infants between 0~6 months.
Nursing mothers will also communicate with each other through internet when deciding which brand of
baby formulas to purchase, and when to start feeding infants for supplementary food. There are several
well-known websites in China such as Mama.com (http://www.mamacn.com/) and Pacific Baby
(http://www.pcbaby.com.cn/) with countless information for parents to share their experience and
knowledge. From time to time, these popular parental guidance websites will launch baby food item
appraisals through comparisons to offer more “unbiased” reference points to Chinese parents.
Although directly imported baby food and infant
formula tend to have a higher price, Chinese parents
have been shifting to international brands with demand
towards higher quality and safer products. On another
hand, many parents prefer to purchase healthier
formulations instead of the ready-to-eat baby food with
added vitamins and calcium, for instance. Public
concern over domestic powdered milk formula still
prevails two years after the melamine-tainted milk
scandal, which has indirectly enabled sales growth and A mainland Chinese consumer purchased large
opportunities for more and more foreign brands of baby case of infant milk powder from a local Hong
Kong Retail Store
food to enter the market and establish credibility over
Chinese parents living in South China, particularly those from the Pearl River Delta enjoying geographic
proximity to Hong Kong are streaming across the border for high quality infant formula, especially
when the rise in China’s currency has also made Hong Kong products relatively less expensive than
those sold in the Mainland market. Many of these baby products carried over from Hong Kong are sold
in Taobao, a Chinese website for online shopping similar to eBay and Amazon. Some overseas Chinese
living abroad even purchase baby food on Mainland internet shoppers’ behalf and deliver the products
directly to China through express mail. Thousands if not close to a million consumers from Mainland
China routinely snatch milk powder from Hong Kong and sell to Mainland parents either through
internet retailing or other channels. The demand is so great that Hong Kong retailers have to limit
purchases to four per costumer.
Rising consumer power and growing awareness on food safety will continue to fuel the baby food
market demand in China. While there have already been a number of directly imported baby food items
from Europe, Australia and New Zealand, it is time for other U.S. brands to seize this golden
opportunity and access the China market-- particularly when organic baby formula and goat milk
formula will remain as a niche market and competition is yet to be challenged by domestic producers.